How will the election impact your investments?
Seeing past the myths
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Strategies for addressing today's market challenges
As the presidential election campaigns hit full swing, many people are wondering what impact the election will have on their investments. The bottom line is that history shows election outcomes rarely have a lasting effect on the market, and staying the course and pursuing long-term financial goals may be the best option for most investors.
Don’t bet your financial security on election predictions
In 1948, Thomas Dewey was overwhelmingly favored to win the White House from the incumbent, President Harry S. Truman. Early on Election Night, the Chicago Tribune declared Dewey the winner, only to see Truman score a historic upset. Over the next two weeks, stocks fell by more than 10%, frustrating investors who had expected to profit from a predicted post-election surge. This example is a cautionary tale about the futility of using elections as a guide for how to invest.
Separating myths from facts
Cautionary Tale
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Test your knowledge on what's
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MYTH
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FACT
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In fact, markets have generally been strongest during the third year of a presidential term.
7.4%
Year 1
4.3%
Year 2
12.1%
Year 3
7.6%
Year 4
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Source: Dow Jones & Co. (Dow), 1897-2019. Based on simple arithmetic averages of closing annual index values for the Dow Jones Industrial Average (DJIA). The 4th year of President Donald Trump’s term (2020) is not included in these calculations. Past performance is not a guarantee of future results.
Market performance improves just before and after a presidential election?
MYTH
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MYTH
FACT
(click to choose)
Correct! This is a myth.
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DJIA Performance by Year of Presidency 1897-2019
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Testing your knowledge
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In fact, markets have generally been strongest during the third year of a presidential term.
DJIA Performance by Year of Presidency 1897-2019
Sorry... this is actually a myth.
MYTH
7.4%
Year 1
4.3%
Year 2
12.1%
Year 3
7.6%
Year 4
Source: Dow Jones & Co. (Dow), 1897-2019. Based on simple arithmetic averages of closing annual index values for the Dow Jones Industrial Average (DJIA). The 4th year of President Donald Trump’s term (2020) is not included in these calculations. Past performance is not a guarantee of future results.
Over the last 50 years, returns have outperformed under a divided government.
9%
Divided Government
7.4%
Unified Government
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Source: Dow Jones & Co. (Dow), Unified Government is defined as a Presidency, House and Senate under one political party. Past performance is not a guarantee of future results.
Markets rise when the same party holds both the Presidency and both houses of Congress?
MYTH
FACT
YES!
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DJIA Average Annual Returns 1970-2019
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FACT
Correct! This is a myth.
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Testing your knowledge
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Source: Dow Jones & Co. (Dow), Unified Government is defined as a Presidency, House and Senate under one political party. Past performance is not a guarantee of future results.
FACT
Over the last 50 years, returns have outperformed under a divided government.
DJIA Average Annual Returns 1970-2019
YES!
9%
Divided Government
7.4%
Unified Government
Sorry... this is actually a myth.
There is no proven link between market performance and which party is in power.
9.3%
Under Democratic President
6.6%
Under Republican President
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Source: Dow Jones & Co. (Dow). Based on the DJIA average annual return, 12/31/1987–12/31/2019. Percent change reflects simple arithmatic averages of DJIA price returns. Past performance is not a guarantee of future results.
The economy and the markets always do better under one party.
MYTH
FACT
YES!
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Average Annual Stock Market Gain
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FACT
Correct! This is a myth.
(click to choose)
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Testing your knowledge
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Source: Dow Jones & Co. (Dow). Based on the DJIA average annual return, 12/31/1987–12/31/2019. Percent change reflects simple arithmatic averages of DJIA price returns. Past performance is not a guarantee of future results.
There is no proven link between market performance and which party is in power.
FACT
Average Annual Stock Market Gain
YES!
9.3%
Under Democratic President
6.6%
Under Republican President
Sorry... this is actually a myth.
It’s crucial to keep looking beyond the headlines, promises and hype—to put a plan in place based on your objectives, situation and risk tolerance, monitor it regularly and consider staying invested. An experienced financial professional can help you avoid the emotional ups and downs of investing in today’s market.
So, how did you do?
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Good Job on Separating Myths from Facts!
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Election campaigns generate noise, uncertainty and a lot of information to process. But little of it should have any bearing on your investment goals and strategy. Offering expertise and objectivity, a financial professional can help you put it all in perspective and implement an investment strategy that’s right for you, regardless of what happens on Election Day.
No Worries!
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Testing your knowledge
Important Information The content of this presentation is provided for informational purposes only. It is not intended to represent the recommendation to buy or sell any particular security or investment. Past performance is not indicative of future results. Investments in stocks involve risk, including the possible loss of principal. When stocks are sold, investors may pay tax at either the ordinary income tax rate or the long-term capital gains tax rate. Please discuss with your financial professional the benefits and risks of investing in these securities. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but also including financial and other service-oriented companies. Investors cannot invest directly in an index. Life insurance and annuities issued by American General Life Insurance Company (AGL), Houston, TX except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). Certain annuities issued by The Variable Annuity Life Insurance Company (VALIC), Houston, TX. Issuing companies AGL, US Life and VALIC are responsible for financial obligations of insurance products. VALIC, AGL and USL, its employees, representatives do not provide tax or legal advice. Products and services may not be available in all states and product features may vary by state. Annuities are distributed by AIG Capital Services, Inc., Member FINRA, 21650 Oxnard Street, Suite 750, Woodland Hills, CA 91367-4997, 1-800-445-7862. Mutual funds are distributed by AIG Capital Services, Inc., Member FINRA, Harborside 5, 185 Hudson Street, Suite 3300, Jersey City, NJ 07311, 800-858-8850. AIG Capital Services, Inc. is a member of American International Group, Inc. (AIG). © American International Group, Inc. All rights reserved. W5691WP5 (9/20)
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Consider teaming up with a financial professional to position your portfolio to help meet your long-term financial goals.
